It is easy to be tempted by dealer finance that looks fantastic, but in reality comes with more hidden charges and fees than you bargained for. Organise your finance before you go car-hunting to ensure you’re getting the best deal on your car finance. Often when people think of car finance, people assume car loans through dealerships or banks are their only options – but there are many others.
Choosing the right car finance for your situation will save you a lot of hassle down the track, as well as make you great savings! There are many factors to consider such as which features will best suit your needs, and whether the car will be used mostly for business or leisure.
The following list is a starting point for learning about car finance, and it is important you consider your personal circumstances when deciding on a method of car finance. A Naritas finance consultant will be able to help you with this too.
This is what most people think of when looking to finance a new car. A traditional car loan is when a financier advances you funds to purchase a car, giving you ownership of the car as soon as you purchase it, and the financier takes an interest in the car as security for the loan. At the completion of the contract, the financier no longer has interest in the car, leaving you with clear title.
Car Loans generally have flexible terms, with a choice of fixed or variable interest rates, and the loan is secured against the car which allows for lower interest rates.
When using a personal loan to finance your new car, the financier will advance funds to you and take ownership of the car at the time of purchase. You proceed to repay the loan to the financier over the agreed terms. The difference between this and a car loan is that the financier doesn’t hold the vehicle as security for the loan; they do however have ownership of the car until your loan is fully repaid.
Personal loans are offered with flexible terms usually from 1 to 10 years and with fixed or variable interest rates. As the loan is not secured, interest rates are generally higher than with other forms of finance.
Car Finance Lease
This is also referred to as an Asset Lease or Vehicle Lease, and is generally used by businesses or sole traders where you have access to the car or commercial vehicle as if it were yours, but the financier keeps ownership of the car.
This type of lease has many benefits, including all payments qualifying as immediate tax deductions (in some cases), fixed interest rates, and lower monthly repayments. Tax deductions are applicable for business use and because the finance is secured against the car, the interest rate is lower.
Sole traders and businesses may also consider a Chattel Mortgage. This means a financier advances you the money for a car, and you take ownership of the vehicle. The financier will then mortgage the vehicle as security for the loan. The security is released once the contract is completed, and you take full title of the vehicle.
A Chattel Mortgage is a great option if you need fixed repayments, and want to know costs in advance. Finance is secured against the vehicle so lower interest rates can be applied and flexible terms are available (12-60 months).
Fully Maintained Novated Lease
A Fully Maintained Novated Lease is also known as salary sacrificing or salary packaging. This is an Australian Tax Office approved method of salary packaging a car meaning you, as an employee, lease a car, and your employer pays off the lease repayments, as well as running costs of the car, from your pre-tax income.
This method of car finance can be a tax-effective way to buy a vehicle, and also a great way for employers to offer an extra incentive to their employees for little to no extra cost.
A Novated Lease is also a Salary Packaging option, however only the car is packaged, and you pay running costs separately.
0% finance can sound like an unbeatable rate, but you need to check if it really is the best deal as there are often hidden terms and conditions.
To see how it really compares to other forms of financing, you must take into account the price you pay for the car, including on-roads, and add any fees and charges involved. You will often find you have to pay more for the car, plus full on-roads, to qualify for 0% finance, so you may find this method will actually mean you are paying more money overall.
You should also be aware of the terms and conditions associated with dealer finance options. 0% finance is usually only applicable to specific loan terms and residuals (e.g. 4 years and 40% residual), and nominating different terms will incur normal interest rates. Make sure you check the terms and conditions, and interest rate, rather than getting caught up in just the repayment figure.
The best way to verify which deal is best is to compare the total repayments on dealer finance with the total repayments offered elsewhere.
Some other tips
Negotiate your finance separately to ensure the best possible deal, then haggle over the price of the car. This will ensure you come out on top as having pre-approved loan lets the dealer know you are ready to purchase, thus making them more willing to drop their prices to make a sale.
If you are looking for something easy but affordable, check out Naritas Private fleet service. Our vehicle procurement service connects you with your new car through our extensive network of dealers.By negotiating with our panel of dealers on your behalf, we can find you the best deal, assist you with finance, and take care of your trade-in. It's the smarter way to buy a new car. So if you are interested in buying a new car within the next six months, register your interest with our Private fleet team now by completing our simple online form.
For more information, or if you would like to see which car finance solution could work best for you, try us out and get an online quote in just 60 seconds. Call us on 1300 558 887 or chat to us online now.